Hanwei Completes Ershigs Joint Venture Agreement
Vancouver, BC, August 1, 2008. Hanwei Energy Services Corp. ("Hanwei" or the "Company") announced today that it has entered into a joint venture agreement with Ershigs, Inc. ("Ershigs") as previously announced (see press release dated December 3, 2007) to become a leading provider of fibreglass reinforced plastic ("FRP") products to China. Per the terms of the joint venture agreement, the two companies will form a 50:50 joint venture (the "Joint Venture") incorporated in Canada, which will establish a wholly foreign owned enterprise subsidiary (the "WFOE") in Beijing, China. Hanwei and Ershigs will invest a total of RMB50 million (US$7.3 million) in the joint venture during 2008 and 2009 on an equal basis. Ershigs will contribute large diameter FRP winding equipment and certain other assets to the WFOE through the Joint Venture, and Hanwei's subsidiary, Beijing Long Road Pipe Technology Co., Ltd. ("Long Road"), will sell its current flue gas desulphurization ("FGD") spray header production lines and various assets to the WFOE. Ershigs and Hanwei, through its subsidiary Long Road, will license their FRP-related intellectual property and technologies to the Joint Venture and its subsidiary. In addition, Ershigs will provide initial training to support the technology transfer to the Joint Venture and ongoing technical support to the WFOE.
The WFOE is expected to be established in August 2008 and to begin operations in the fourth quarter of 2008. The board and management team, which is currently being assembled, will be a combination of seasoned industry professionals from both companies. Management and sales will be based at Hanwei's offices in Beijing, with engineering and manufacturing operating within premises rented from Hanwei in Tianjin, China. As previously disclosed, Hanwei is currently building a facility in Tianjin, China that will be used for FGD products and to expand its wind blade production capacity.
The WFOE will initially offer FRP spray headers, ducts and chimney liners targeted at FGD systems for coal fired plants. Hanwei and Ershigs estimate that the total addressable market in China for FRP products for FGD solutions over the next three years is over RMB 10.6 billion (US$1.5 billion) and RMB6.8 billion (US$990 million) for the initial products of the Joint Venture. The market is supported by government policy that requires the operators of coal fired plants to install sulphur dioxide (SO2) scrubbers in all new plants and retrofit all large plants.
After establishing production and sales infrastructure for the initial FGD products, the Joint Venture plans to add the full range of Ershigs' FRP FGD products to its offering for the China coal fired pollution control market. In addition, the WFOE plans to identify other sectors in China where Ershigs' FRP technology can be used to develop a leading market share, such as tanks and pipes for petrochemical, pulp & paper and water applications.
"Ershigs has been looking for a way to enter the China market for advanced FRP applications, which includes the largest global market for FGD systems to reduce sulphur dioxide emissions from coal fired power plants," stated Tom Pilcher, president of Ershigs. "We believe that Hanwei's customer relationships, market knowledge and extensive operating expertise in China, combined with our sales and engineering expertise, and proprietary technology for producing a full range of FRP products will provide the Joint Venture with a competitive advantage as a first mover, offering advanced FRP solutions to the growing China market."
"The FGD market in China is in its early stages and there are no significant competitors operating in China that can offer high quality, reliable large diameter FRP solutions," stated Fulai Lang, president and CEO of Hanwei. "Over 75 percent of China's installed electrical generating capacity is from coal-fired generators, and the number of generators will continue to increase in order to satisfy China's need for energy. Through the Joint Venture, we intend to combine Ershigs' strengths in technology, production, on-site management, operation management and project performance with our own strengths in marketing and government relationships to create a quality brand that offers customers FGD products and solutions that were previously unavailable in our target market. With Ershigs as our partner, we expect to have the financial, human and technology resources to achieve a leading market share of the addressable market for spray headers, ducts and chimney liners in China. We also look forward to the potential to develop FRP solutions for other industries in China that Ershigs has been servicing in USA for the last 40 years."
About Ershigs Inc.
Ershigs is a division of Denali Incorporated, which is the largest custom FRP design, manufacturing and specialty contractor in the U.S. Ershigs has been the leading supplier of quality FRP products and services to the U.S. electric power industry for over 40 years. Extensive experience in FRP design, fabrication, installation and construction management has enabled Ershigs to address a multitude of challenges for power market customers in diverse applications including FRP chimney liners, stacks, ducting, absorber vessels, large diameter storage tanks, abrasion resistant internal spray header piping, external recycle piping, recirculation cooling water piping and chemical feed piping in highly corrosive environments and services. Ershigs combined resources include FRP manufacturing operations in Bellingham, Washington; Sarnia, Ontario; and Grand Bay, Alabama; and a large FRP field manufacturing/construction division which is headquartered in Grand Bay, Alabama. Ershigs has recently completed and/or has under contract more than 50 large-scale FGD coal power projects in the U.S. market.
About Hanwei Energy Services Corp.
Hanwei Energy Services Corp. provides high value products and services for the energy sector in China and the Asia region. Hanwei serves its major energy customers through manufacturing facilities in China, producing products for the oil, coal power and wind power industries. Hanwei is focusing on providing products and services that address the growing need for improved energy efficiency and environmental protection in China and the Asia region. www.hanweienergy.com
For more information please contact:
Kim Oishi, Senior Vice President of Finance and Business Development
416-804-9228
koishi@hanweienergy.com
Or
Kevin O'Connor, Investor Relations
416-962-3300
koconnor@genoa.ca
FORWARD LOOKING INFORMATION
Certain information in this news release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions. This forward-looking information includes information with respect to the assembly and recruitment of board members, management and staff for the Joint Venture, the initial product offerings of the Joint Venture, the addition of the full range of Ershigs' FRP products to the Joint Venture's offerings for the China FGD market, the market position of the Joint Venture as a provider of FRP products to China, the expected market share to be achieved by the Joint Venture, the expected competitive advantages of the Joint Venture and the achievement of its business objectives. The forward-looking information in this news release describes Hanwei's expectations as of the date of this news release. The results or events anticipated or predicted in such forward-looking information may differ materially from actual results or events. Material factors which could cause actual results or events to differ materially from a conclusion in such forward-looking information include the Joint Venture may not be able to assemble and recruit board members, management and staff for the Joint Venture due to lack of qualified candidates or unacceptable terms, the Joint Venture may not have any product offerings or its product offerings may change, the Joint Venture may not be able to achieve a particular market share or any market share, the Joint Venture may not gain any competitive advantages and the Joint Venture may not be able to achieve all of its business objectives due to a variety of factors. When relying on Hanwei's forward-looking information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Hanwei cautions that the foregoing list of material factors is not exhaustive and is subject to change. For additional information with respect to certain of these and other factors, refer to the risk factors section of Hanwei's Annual Information Form dated July 10, 2007 filed with Canadian securities regulators, which is available on SEDAR at www.sedar.com.
Hanwei has included in this news release figures based on orders received, which is a non- GAAP measure. Readers are cautioned that orders received is not a recognized measure under Canadian GAAP and should not be construed to be an indicator of performance or liquidity or cash flows. Hanwei's method of calculating this measure may differ from the method used by other entities and accordingly Hanwei's measure may not be comparable to those used by other entities. Hanwei uses these figures because management has a high degree of confidence that the orders received will represent sales and it believes such figures provide a useful indication of Hanwei's progress.
THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE REPRESENTS THE EXPECTATIONS OF HANWEI AS OF THE DATE OF THIS NEWS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE HANWEI MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME.
